The lawsuit, filed by New York
Attorney General and RMBS Working Group co-chair Eric Schneiderman, claims that "defendants
deceived investors as to the care with which they evaluated the quality of mortgage loans packaged
into residential mortgage-backed securities prior to Bear Stearns & Co's collapse in early 2008,
incurring losses that have totaled approximately $22.5 billion to date." While Bear Stearns "led
its investors to believe that the quality of the loans in its mortgage-backed securities had been
carefully evaluated and would be continuously monitored…it systematically failed to evaluate the
loans, largely ignored defects that its limited review did uncover, and kept its investors in the
dark about the inadequacy of the review procedures and defects in the loans."

In March,
2008, JPMorgan acquired Bear Stearns "for a song," Bloomberg reported, "paying $10 a share, or $1.5 billion for a company with more than
$11 billion in common equity."

The Bush administration "sweetened the deal," according to
Bloomberg, "by agreeing to purchase $30 billion of Bear's risky mortgage assets."

Meanwhile, "top executives were able to pocket large amounts of performance-based
compensation," Harvard law professor Lucien Bebchuck wrote in a 2009 paper examining the
effects of compensation packages on excessive risk-taking. "The top executive teams of Bear
Stearns…derived cash flows of about $1.4 billion…from cash bonuses and equity sales during
2000-2008."

The RMBS Working Group is a state-federal task force, consisting of
representatives from the US Attorney General's office, the Securities and Exchange Commission
(SEC), Housing and Urban Development (HUD), and the Federal Housing Finance Agency (FHFA), among
others.

"This lawsuit will bring accountability for the misconduct that led to the crash
of the housing market and the collapse of the American economy," Schneiderman said. "We need real
accountability for the illegal and deceptive conduct in the creation of the housing bubble in order
to bring justice for New York's homeowners and investors."

Furthermore, "We believe that
this is a workable template for future actions against issuers of residential mortgage-backed
securities that defrauded investors and cost millions of Americans their homes," he said.